Current through August, 2024
(a) As authorized by
section
235-5(e),
HRS, if the director of taxation determines that the method set forth in
section
235-5,
HRS, and administrative rules thereunder does not fairly determine income
derived from or attributable to Hawaii, or does not clearly and accurately
reflect the actual amount of income received from all property and sources
within the State, the director may permit or require:
(1) Separate accounting;
(2) The exclusion of any one or more of the
factors;
(3) The inclusion of one
or more additional factors which will fairly represent the taxpayer's business
activity in this State; or
(4) The
employment of any other method to effectuate an equitable allocation and
apportionment of the taxpayer's income.
(b) A taxpayer may petition the director to
use an alternative apportionment method pursuant to section
235-5(e),
HRS, by written request.
(1) The petition
shall include data clearly showing that the application of factors provided in
the law, including these rules, does not result in a reasonable attribution of
net income to Hawaii due to the peculiar nature of the taxpayer's business and
that the taxpayer's proposed method more clearly reflects income attributable
to Hawaii.
(2) The petition shall
disclose the extent to which the proposed method is being used in other states
to which the taxpayer reports.
(c) The following shall be sufficient to
constitute the director's imposition of alternative apportionment under this
section:
(1) Issuance of an assessment based
on an alternative method accompanied by notification that an alternative method
was used;
(2) For a claim for
refund on an original return, denial of a taxpayer's claim for refund
accompanied by notification that an alternative method was used;
(3) For a claim for refund made via an
amended original return, denial of a taxpayer's claim for refund without more,
provided that the alternative used by the director consists wholly of the
method used by the taxpayer in filing its original return.
(4) In all other cases, any notification that
an alternative method was used.
